Inventory Systems Guide for Wholesalers, Distributors and Manufacturers

Stock, purchasing, warehouses, production and deliveries, and how to keep them in step with Xero or MYOB

What This Guide Covers

This guide is for owners, finance managers and operations managers at Australian wholesalers, distributors and manufacturers whose stock lives in one system and accounts in another. It covers the questions that come up as the business grows: is our inventory app still the right one, why doesn't the stock value match Xero or MYOB, how do we get freight and duty into stock cost, and how do orders, warehouses, production and deliveries flow through without being retyped.

Each section gives the plain-English answer first, then a "Go deeper" list of our detailed articles and pages on that topic. You don't need to read it in order. Jump to the part that's causing the most trouble.

One theme runs through all of it: most of these problems sit between systems, not inside one. The inventory app works and Xero works, but the hand-over between them, or between people and the software, is where stock goes missing, costs go wrong and staff spend their week retyping.

In This Guide

  1. Choosing and Outgrowing an Inventory App
  2. Making Stock Value Match Xero or MYOB
  3. Landed Cost: Freight, Duty and Exchange Rates
  4. Purchasing: Procure to Pay, Purchase Orders and GRNI
  5. Sales Orders: Shopify, B2B Ordering, EDI and Backorders
  6. Warehouses, WMS and 3PLs
  7. Manufacturing: Bills of Materials, Work Orders and Production Planning
  8. Manufacturing Costing and Job Costing
  9. Transport: From Proof of Delivery to Invoice
  10. Where to Start
  11. How Kenomont Helps
  12. Frequently Asked Questions

Choosing and Outgrowing an Inventory App

Most growing goods businesses start with stock in spreadsheets or in the accounting software, then move to a dedicated inventory app such as Cin7 (including Cin7 Core, formerly Dear Inventory) or Unleashed, connected to Xero or MYOB. For many businesses that setup works well for years. The app looks after products, stock levels, purchase orders and sales orders, and the accounts receive the invoices and bills.

The signs you've outgrown it are rarely one big failure. They look like this: staff keep side spreadsheets because the app can't show what they need; a second warehouse, a manufacturing step or a new sales channel is handled with workarounds; month-end takes longer because stock and the accounts don't agree; or the add-ons and connectors bolted on over the years are now the thing that breaks.

Before you change software, find out what's actually broken. Often the app is fine and the problem is how it was set up, the process around it, or the connection to the accounts. Fixing those costs far less than a migration. When you genuinely have outgrown it, the options are broadly a bigger inventory or ERP system, an ERP such as ERPNext running operations while Xero or MYOB keep the accounts, or a custom system for the parts of the business that make you different. Each option has a different cost of moving, and the move itself (product data, open orders, stock on hand and costs) is where most of the risk sits.

Go deeper

Making Stock Value Match Xero or MYOB

One of the most common month-end headaches: the stock on hand value in Cin7 or Unleashed says one thing, and the inventory account on the balance sheet in Xero or MYOB says another. The gap usually grows slowly, so by the time someone notices, nobody knows when it started or which transactions caused it.

The causes are usually ordinary. Manual journals posted straight to the inventory account. Supplier bills for stock entered directly in the accounts instead of through the inventory app. Stock adjustments and write-offs that didn't sync, or synced to the wrong account. Goods received before the bill arrived. Landed costs added after some of the stock had already been sold. And sync errors that failed quietly, with nobody watching the error log.

The fix is a routine, not a one-off clean-up. Make the inventory app the only thing that posts to the inventory account, run a stock valuation report at the same date as the balance sheet, and reconcile the difference every month while it's still small enough to explain line by line. Stock take belongs in the same routine: count, post the adjustment through the inventory app rather than as a journal, and check the accounts moved by the same amount. Agree the method with your accountant or bookkeeper so everyone is reconciling the same way.

Go deeper

Landed Cost: Freight, Duty and Exchange Rates

If you import, the price on the supplier's invoice is only part of what a product costs you. Landed cost adds international freight, customs duty, broker and port fees, local cartage and insurance, and the exchange rate when you actually pay rather than when you ordered. Leave them out and your margins look better than they are. Spread them badly and some products look profitable when they aren't, which affects pricing decisions.

The practical problems are timing and allocation. The freight forwarder's and broker's bills often arrive weeks after the goods, sometimes after part of the shipment has already been sold. You also have to decide how to spread a shipment's costs across its lines: by value, weight, volume or quantity. There's no single right answer, but the method should be chosen deliberately and applied the same way every time.

Cin7, Unleashed and most ERPs can apply landed costs to a receipt. The work is in getting the right bills to the right shipment, applying them before the stock moves on where you can, and making sure the result reaches Xero or MYOB so stock value and cost of sales agree. GST on imports also needs to be recorded correctly in the accounts, which is worth confirming with your accountant.

Go deeper

Purchasing: Procure to Pay, Purchase Orders and GRNI

Procure to pay is the whole path from deciding to buy something to paying for it: request, approval, purchase order, goods received, supplier bill, matching and payment. In a goods business it usually runs across two or three systems: purchase orders in the inventory app or an ERP, receipts in the warehouse, and bills and payments in Xero or MYOB.

Where it breaks: approvals sit in someone's inbox; orders are placed by phone and never entered; goods arrive short or with substitutions and nobody updates the order; the bill doesn't match the order and someone spends an afternoon working out why; or the same bill is entered twice, once in each system. The result is money committed that nobody can see, and bills paid that shouldn't have been.

Goods received not invoiced (GRNI) is the stock you've received but haven't been billed for yet. Your inventory app knows it's on the shelf, but the accounts have no bill, so at month-end your stock and what you owe suppliers are both understated. A simple month-end check (list receipts without a matching bill, accrue them, reverse next month) keeps the balance sheet honest.

If your purchase orders start in a job, field service or stock system rather than in Xero, the goal is the same: one purchase order, created once, that flows through to the bill so orders, bills and stock or job costs still match.

Go deeper

Sales Orders: Shopify, B2B Ordering, EDI and Backorders

Orders now arrive from more places than they used to: reps, phone and email, a trade ordering portal, a Shopify store for retail or trade customers, and for some suppliers, EDI orders from major retailers. Every channel that's retyped by hand is a chance for a wrong product code, a wrong price or a missed order, and it's usually your busiest people doing the retyping.

The aim is for every order to land in one place, usually the inventory app or ERP, with the right customer, price list and stock allocation, and for stock levels to flow back out to every channel so you don't sell what you haven't got. Shopify inventory integration is a common example: the store needs to show available stock rather than just stock on hand, and orders, refunds and fulfilments need to come back cleanly.

EDI is how major retailers send purchase orders and expect despatch notices and invoices back, in a fixed electronic format. Many suppliers start with a web portal and retype everything, which works until volumes grow. Connecting EDI to your stock system and Xero or MYOB removes the retyping and the penalties that come from mistakes.

Backorders are where sales and stock collide. When stock is short, someone has to decide which orders to fill first, check what's on order from suppliers and when it lands, and tell the customer. If that lives in one person's head or a spreadsheet, it's worth moving into the system, with clear allocation rules and a backorder report that purchasing and sales both use.

Go deeper

Warehouses, WMS and 3PLs

When you add a second warehouse, start using a third-party logistics provider (3PL), or bring in a warehouse management system (WMS) for picking and scanning, your stock is now in more than one system at once. The inventory app holds the commercial picture: what's been ordered, sold and costed. The warehouse system or 3PL holds the physical picture: what's in which bin, and what's been picked and shipped.

The common problems are timing and ownership. Orders reach the 3PL late or twice. Despatch confirmations and tracking come back late, so invoices wait. Receipts at the 3PL don't match the purchase order. And the 3PL's stock count and yours drift apart. Without an agreed source of truth for each piece of information, people end up reconciling by spreadsheet and arguing about whose number is right.

A good integration sends orders to the warehouse as soon as they're ready to pick, brings back despatches, receipts and adjustments automatically, and flags exceptions to a person instead of failing quietly. A regular stock reconciliation between your system and the 3PL's catches problems while they're still a few lines, not a write-off at year end.

Go deeper

Manufacturing: Bills of Materials, Work Orders and Production Planning

A bill of materials (BOM) lists the parts, materials and sub-assemblies that go into a finished product. A work order (or production order) is an instruction to make a quantity of it, which uses up components and creates finished stock. Production planning works out what to make, when, and what you need to buy to make it. MRP (materials requirements planning) is the system version of that.

Small manufacturers often keep BOMs in spreadsheets and record production as a stock adjustment in the inventory app. That works with a handful of products. It stops working with multi-level BOMs, variants, substitutions, batch or lot tracking, or when purchasing can't see what's needed for next week's production until the shortage hits the floor.

Xero and MYOB aren't manufacturing systems, so BOMs and production live somewhere else: an inventory app's assembly features, an MRP or ERP such as ERPNext running alongside the accounts, or a custom system for the steps that are specific to how you make things. The right choice depends on how complex your products and processes are. Whatever runs production, the floor needs a quick way to record what was made, used and scrapped, because your stock and costs are only as good as that data.

If you already run an older manufacturing system that's hard to change, it often makes more sense to connect it to the rest of the business, or replace it in stages, than to rip it out in one go.

Go deeper

Manufacturing Costing and Job Costing

Knowing what a product or job really costs to make is where many manufacturers on Xero or MYOB struggle. Materials are usually captured. Labour, machine time and overheads often aren't, or only as a lump in the accounts at month-end. Margins then come out of the accounts as one total, not by product, customer or job, so you can't tell which work is paying its way.

There are a few ways to approach it. Standard costing sets an expected cost for each product and reports the differences when reality doesn't match. Actual or job costing collects the real materials, labour and overheads against each job or work order. Make-to-order and custom work usually need job costing; repeat products often suit standard costing. Either way, work in progress (jobs started but not finished) needs a value at month-end so the accounts reflect it.

The systems question is how the data gets there: time from the floor (timesheets, job clocks or production records), materials issued to each job, and an overhead rate agreed with your accountant, brought together so you can see a job's margin while it's still running rather than weeks after it's finished. The accounts then receive summarised postings for cost of goods sold and work in progress, not every transaction.

Go deeper

Transport: From Proof of Delivery to Invoice

For businesses that move goods, whether a transport company or a wholesaler running its own trucks, the delivery is often where the billing data starts. Proof of delivery (POD) records what was delivered, where and when, plus extras like waiting time, extra drops or tail-lift work. If PODs are paper or photos in a driver app and someone retypes them into the invoicing system, invoices go out late and extra charges get missed.

The fix is to capture the job details once and carry them through: booking to job, job to POD, POD to invoice in Xero or MYOB, with exceptions such as a missing signature or a disputed quantity flagged for a person rather than holding up every other invoice. For carriers using owner-drivers or subcontractors, the same job data drives what you pay them, often through recipient-created tax invoices (RCTIs).

Fuel levies are the other moving part. When diesel prices move, the levy you charge customers, the rates you pay owner-drivers and the RCTIs all need to change together, or margin leaks away without anyone noticing.

Go deeper

Where to Start

Pick the line that sounds most like your business this month.

How Kenomont Helps

Kenomont is a small, founder-led systems consultancy. Aaron Chambers, based on the Gold Coast with more than 20 years of experience, does the work with businesses across Australia, remotely, travelling when a project needs it. We don't sell inventory software. We work out where stock, orders, production and the accounts stop lining up, then fix the setup, connect the systems or build what's missing, working alongside your accountant, bookkeeper or software partner.

Typical work includes inventory management consulting, landed cost and stock integration, warehouse and 3PL integration, Shopify inventory integration, BOM and production planning, manufacturing job costing and custom inventory systems where off-the-shelf apps don't fit.

Every project is scoped and given a fixed quote after a free initial chat. If several of the problems in this guide are happening at once and you're not sure which to tackle first, the $5,000 Process & Systems Audit maps how the work really flows and gives you a written, prioritised plan, whether we help with the fixes or you do them yourselves.

Frequently Asked Questions

The signs are usually workarounds rather than one big failure: side spreadsheets because the app can't show what staff need, a second warehouse or manufacturing step handled by hand, add-ons that keep breaking, and a month-end where stock never agrees with the accounts. Before changing software, check whether the problem is the app itself or how it's set up and connected. Often fixing the setup or the connection is enough.

The usual causes are journals or bills posted straight to the inventory account in the accounts, stock adjustments that didn't sync, goods received before the bill arrived, landed costs added late and sync errors that failed quietly. Lock the inventory account so only the inventory app posts to it, and reconcile the stock valuation report to the balance sheet every month while the difference is still small.

No. Xero and MYOB can keep the accounts while an inventory app, an ERP such as ERPNext or a custom system runs stock, purchasing and production. The operations system sends invoices, bills and summarised stock postings to the accounts, so your bookkeeper and accountant keep working the way they do now.

It depends on how many systems are involved, how much data needs cleaning up and how much has to be custom-built. We scope every project first and give you a fixed quote after a free initial chat. If you don't yet know where the real problem is, our Process & Systems Audit is a fixed $5,000 and ends in a written report with a prioritised plan.

No. We need the people who run purchasing, the warehouse, production and the accounts, because they know where the work gets retyped or goes wrong. If you have someone who looks after your systems, we'll work with them, and we can work alongside your accountant, bookkeeper or software partner.

Landed cost is what a product really costs you once freight, duty, broker and port fees, local cartage and exchange rates are added to the supplier price. If you import stock, you need it: without it your margins look better than they are, and some products can look profitable when they aren't.

Not on their own. They are accounting systems. Small manufacturers usually run bills of materials and production in an inventory app with assembly features, an MRP or ERP alongside the accounts, or a custom system, and send the finished results and costs to Xero or MYOB.

Start with the problem that costs you most each month, usually stock value not matching the accounts, purchasing that nobody can see, or orders being retyped. If you can't tell which one it is, a free initial chat or the $5,000 Process & Systems Audit will map how the work flows today and put the fixes in order.

Stock and the Accounts Not Lining Up?

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